Lender Inland American takes over The Railyards

By Michael Shaw – Staff writer

Oct 22, 2010, 10:31am PDT

Thomas Enterprises Inc. is out as owner of the downtown Sacramento railyards.

On Friday afternoon, lender Inland American Real Estate Trust Inc., a Chicago-based real estate investment firm, took ownership of the 200-acre property after there were no bids at a foreclosure sale. The site has long been considered the largest urban renewal site in the U.S.

A subsidiary of Inland took ownership and pledged to work with the city to keep the project rolling.

“Inland American can now start to roll up its sleeves and work with the city of Sacramento and state agencies to allow the project to proceed,” said Inland representative Jared Ficker following the foreclosure sale. He declined any comment other than to say construction on roads and bridges has continued throughout the foreclosure process.

The federal and state government have pledged millions of dollars to build infrastructure at the site, and assistant city manager John Dangberg said indications are that the funds are still likely to flow to the project. Only a small percentage of state bond funds, about $7 million, has been transferred to the project.

“We have a great deal of faith in Inland,” Dangberg said.

Thomas Enterprises representatives could not be reached for comment. The company was apparently unable to reach an agreement to resolve $186 million in loans on the property that would’ve stopped or delayed the foreclosure. With interest and penalties, the total owed had risen to $193 million.

A news release from Inland said Thomas will serve in a consulting role on the project to help with the transition. Inland said it is assembling a project development team and will establish an office in Sacramento and expects to issue a more extensive update for the community on its plans within the next two months.

“Inland American believes this resolution of the Thomas default is in the best interest of both the community and its own shareholders,” said a news release from Inland. “The foreclosure removes any uncertainty related to the project, its ownership and the capability to move forward with development.”

Thomas Enterprises bought the property from Union Pacific railroad in late 2006 following a lengthy negotiation, pledging to add a vibrant mixed-use development to downtown Sacramento. Owner Stanley E. Thomas called The Railyards project the company’s “shining light.”

But the real estate crash hit the Georgia-based company hard as many of its projects went into bankruptcy. Documents and testimony in a separate lawsuit showed Thomas borrowed the $186 million against the railyard property, pledged personal assets as collateral and used at least some of the proceeds on other projects.

The auction was over within about 10 minutes.

Auctioneer Mike Birdsall, a representative of Stewart Title Co., sat calmly at a bench in front of the Sacramento County Courthouse and announced the trustee sale of the railyards property. There was a slight glitch when Birdsall announced the opening bid at $50,350 instead of the correct $50.35 million figure. But that was quickly resolved.

Bidders were unlikely to surface because the auction was solely for Inland’s second mortgage on the property. Since Inland still held the first mortgage, it would not be possible for a third party to obtain ownership through Friday’s auction.

Dangberg said Inland will abide by the city’s purchase agreement for approximately 38 acres within the railyard property for a transportation hub, including payment of an outstanding balance owed to the city of $2.7 million. The transfer needs to take place before railroad tracks can be moved to accommodate that projects.

The entitlements and development agreements for 12,000 homes, millions of square feet of offices and retail for The Railyards project, were granted to Thomas, so new agreements will likely have to be struck with Inland. Dangberg said a next step will be to introduce Inland representatives to the city staff and elected officials.

Lender Inland American takes over The Railyards

By Michael Shaw – Staff writer

Oct 22, 2010, 10:31am PDT

Thomas Enterprises Inc. is out as owner of the downtown Sacramento railyards.

On Friday afternoon, lender Inland American Real Estate Trust Inc., a Chicago-based real estate investment firm, took ownership of the 200-acre property after there were no bids at a foreclosure sale. The site has long been considered the largest urban renewal site in the U.S.

A subsidiary of Inland took ownership and pledged to work with the city to keep the project rolling.

“Inland American can now start to roll up its sleeves and work with the city of Sacramento and state agencies to allow the project to proceed,” said Inland representative Jared Ficker following the foreclosure sale. He declined any comment other than to say construction on roads and bridges has continued throughout the foreclosure process.

The federal and state government have pledged millions of dollars to build infrastructure at the site, and assistant city manager John Dangberg said indications are that the funds are still likely to flow to the project. Only a small percentage of state bond funds, about $7 million, has been transferred to the project.

“We have a great deal of faith in Inland,” Dangberg said.

Thomas Enterprises representatives could not be reached for comment. The company was apparently unable to reach an agreement to resolve $186 million in loans on the property that would’ve stopped or delayed the foreclosure. With interest and penalties, the total owed had risen to $193 million.

A news release from Inland said Thomas will serve in a consulting role on the project to help with the transition. Inland said it is assembling a project development team and will establish an office in Sacramento and expects to issue a more extensive update for the community on its plans within the next two months.

“Inland American believes this resolution of the Thomas default is in the best interest of both the community and its own shareholders,” said a news release from Inland. “The foreclosure removes any uncertainty related to the project, its ownership and the capability to move forward with development.”

Thomas Enterprises bought the property from Union Pacific railroad in late 2006 following a lengthy negotiation, pledging to add a vibrant mixed-use development to downtown Sacramento. Owner Stanley E. Thomas called The Railyards project the company’s “shining light.”

But the real estate crash hit the Georgia-based company hard as many of its projects went into bankruptcy. Documents and testimony in a separate lawsuit showed Thomas borrowed the $186 million against the railyard property, pledged personal assets as collateral and used at least some of the proceeds on other projects.

The auction was over within about 10 minutes.

Auctioneer Mike Birdsall, a representative of Stewart Title Co., sat calmly at a bench in front of the Sacramento County Courthouse and announced the trustee sale of the railyards property. There was a slight glitch when Birdsall announced the opening bid at $50,350 instead of the correct $50.35 million figure. But that was quickly resolved.

Bidders were unlikely to surface because the auction was solely for Inland’s second mortgage on the property. Since Inland still held the first mortgage, it would not be possible for a third party to obtain ownership through Friday’s auction.

Dangberg said Inland will abide by the city’s purchase agreement for approximately 38 acres within the railyard property for a transportation hub, including payment of an outstanding balance owed to the city of $2.7 million. The transfer needs to take place before railroad tracks can be moved to accommodate that projects.

The entitlements and development agreements for 12,000 homes, millions of square feet of offices and retail for The Railyards project, were granted to Thomas, so new agreements will likely have to be struck with Inland. Dangberg said a next step will be to introduce Inland representatives to the city staff and elected officials.